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Why Is Signet Jewelers' Stock Surging Today?

By John Rosevear – Jan 3, 2022 at 6:38AM

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Fears that led to a November sell-off now appear overblown.

What happened

Shares of jewelry-store giant Signet Jewelers (SIG -0.69%) were trading sharply higher on Monday morning, up about 10.6% from Friday's close as of 11:00 a.m. ET.

There was no big news driving the gain. But it's possible that this gain is about something that didn't happen: The severe disruptions of retail during the holiday season that many analysts had forecast.

So what

Signet's shares fell sharply in late November on concerns about holiday-season retail disruptions. They haven't yet fully recovered, but given that those disruptions mostly didn't happen, the price jump isn't surprising.

SIG Chart

SIG data by YCharts.

Signet itself hasn't been shy about telling investors that good things are happening. Most recently, in its earnings report on Dec. 2, Signet raised its guidance for the fiscal year that will end on Jan. 31. It now expects:

  • Revenue between $7.41 billion and $7.49 billion. (Previous guidance: between $7.04 billion and $7.19 billion.)
  • Same-store sales up 41% to 43% from the prior year. (Previous guidance: up 35% to 38%.)
  • Non-GAAP (adjusted) operating income between $777 million and $814 million. (Previous guidance: between $680 million and $735 million.) 

Now that the holiday season has concluded with far fewer disruptions than many retail stock analysts had expected, it's quite possible that Signet will beat even that increased guidance when it reports its full-year earnings in March.

That may be why the stock was surging on the first trading day of 2022.

Diamond rings in a jeweler's display case.

Image source: Getty Images.

Now what

Signet hasn't yet provided investors with an outlook for the fiscal year that will begin on Feb. 1 (its 2023 fiscal year). But given the early signs that the omicron variant of COVID-19 may be less serious than anticipated, and with hospitality industry analysts expecting a surge in weddings in 2022, it seems quite likely that Signet -- the world's largest seller of diamond jewelry -- will be on track for another year of profitable growth. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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